Just passing along word I received from a tax professional on the subject of the recent property tax rebates.
#Whatever you paid in property taxes for 2007 (without considering the rebate) is the amount you itemize on your 2007 tax return.
#The 2008 rebate check will be “other income” in the year 2008 if you itemize your taxes (and assuming your county actually issues the rebate in the year 2008).
#There is apparently still an issue with respect to Indiana taxes on which there has not been a clear opinion.
I am not a tax professional. I very well may have garbled the information that was conveyed to me. By way of disclaimer, I encourage you to regard everything I write here as lies, damned lies, and/or statistics; but certainly not legal advice.
No, Doug you did fine. Most of my clients are simply cashing the check and not saving the amount they paid. As you noted, if you itemize on your 2007 tax return and you placed property taxes paid on that Schedule A, then in 2008 the difference,(rebate check) becomes that “other income” on your 2008 Federal tax return.
As far as what the state will do, property taxes are allowed up to $2500.00 on the Indiana return. Again, it’s what you paid in the year you paid it. I suppose the Indiana Department of Revenue will provide some direction before next years filing season.
One final point. All this could have been avoided if the rebate/reduction was on the 2007 bills. But our leaders wanted homeowners to get that check instead of reducing the 2007 bill. I cannot guess what it cost each County to produce and send out those rebates.